The US economy gained jobs at a rapid pace in the past three months, with a superb 292K in December. However, the first NFP publication for 2016 could be negative, at least according to one sector: manufacturing.
While it was no surprise to see the headline ISM Manufacturing PMI miss expectations with 48.2 points, within contraction territory, the employment component is already flashing red with only 45.9 points, a figure showing not-so-insignificant job cuts.
Any score under 50 implies contraction while scores above 50 imply growth. The silver lining came from a bounce in new orders: these advanced from under 50 points to 51.5, showing modest expansion.
As with many developed countries, manufacturing is a small sector. Most of the economies are around services. However, the manufacturing sector actually creates stuff, and the situation in manufacturing is usually correlated with the larger economy.
Manufacturing is struggling all over the world: data is weaker also in China, showing contraction in both the official and independent measures.
We still have the ADP and ISM Non-Manufacturing PMI on Wednesday. These two indicators can give us further insight towards Friday’s official NFP and it may still look good. However, without real growth (and we’ve seen poor growth in the GDP report), it is hard to see rapid job growth coming.
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